In Pa., District Tries 3-Way Contest To Fix Schools

There is a new business model for private management of public
education.

It was developed not by an entrepreneur or venture capitalist
viewing the public schools as a potentially rich market for
privatization. The latest model was hatched, in effect, by the state
board of control that oversees the troubled Chester-Upland, Pa.,
schools south of Philadelphia.

The board last fall invited private companies to bid on managing its
11 schools, serving some 7,500 students. Some companies, such as Edison
Schools Inc., the largest private manager of public schools, sought to
win the whole contract in partnership with the local teachers'
union.

But the Chester-Upland control board, which has overseen all the
district's operations since last year, had another idea. Late last
month, it chose three companies to run the district's
schools—creating competition among the three for students.
("State Chooses 3
Companies To Run Pa. District's Schools," March 28, 2001.)

Competing Companies

Here's a look at the three companies hired to manage
schools in the Chester- Upland, Pa, school district:

Edison Schools Inc.
Headquarters: New York City 2000-01 number of
schools: 113
2000-01 enrollment: 7,000
Number of Chester-Upland
schools to be managed: 6

LearnNow Headquarters: New York
City
2000-01 number of schools: 5
2000-01 enrollment: 2,000
Number of Chester-Upland
schools to be managed: 4

Mosaica Education
Headquarters: New York City
2000-01 number of schools: 20
2000-01 enrollment: 5,000
Number of Chester-Upland
schools to be managed: 1

Edison will get the biggest piece: four elementary schools and two
middle schools. LearnNow, a newer school-management company focused on
urban education, will run the district's lone high school and three
other schools. And Mosaica Education Inc. will take over one elementary
school. All three companies are based in New York City.

Under the arrangement, the three companies will have to cooperate on
some matters, such as a joint teacher contract and the transfer of
student records. But they will clearly vie with one another to persuade
parents to choose their schools at the elementary and middle school
level.

"I really think it is going to be healthy competition," said Thomas
E. Persing, the president of the three-member control board that made
the March 22 decision. Mr. Persing, who is the superintendent of the
nearby 3,300-student North Dublin district, has often said the board
did not want to trade a traditional public school monopoly for "a
private monopoly" in which one company managed the schools.

The other members of the control board are an investment adviser and
the superintendent of a correctional institution.

"I think each company got enough of a bite that it is going to take
them a little while to chew, let alone digest it," Mr. Persing added.
"We felt we were large enough, with 7,500 students, to divide it up so
that parents would have a choice."

Working Together

The Chester-Upland model is likely to be watched closely.

"It's novel," said Jeanne Allen, the president of the Center for
Education Reform, a Washington think tank that supports school choice
and private management.

"I was happy to see they picked three providers," she said. "The
more the merrier. The competition between them and the diversity of
their programs will bring about a better learning environment more
quickly."

Private management of public education has boomed in recent years,
driven by the rise of independent, publicly financed charter schools,
many of which have turned to for-profit management from a dozen or so
companies. Meanwhile, Edison, which is a major player in the
charter-management market, also aggressively seeks contracts with
districts to take over the management of traditional public
schools.

Only recently, however, has Edison begun seeking to manage entire
districts. Last year, the fiscally and academically troubled Inkster,
Mich., school district hired Edison to manage all of its schools,
serving 1,500 students. Edison has control over district finances,
curriculum, and staffing, in addition to installing its educational
program.

The Inkster deal was the first foray into overall district
management by a private company since a handful of arrangements of the
early 1990s essentially ended in failure. Most notable of those was a
contract in which a company then known as Education Alternatives Inc.
managed the Hartford, Conn., district from 1994 to 1996 and managed
several public schools in Baltimore around the same time. EAI became
Tesseract Schools Inc., which filed for bankruptcy last year.

Edison clearly wanted Chester-Upland to be its second contract to
manage an entire district. It joined with the Pennsylvania State
Education Association, an affiliate of the National Education
Association, to bid on running all 11 schools.

"We had proposed to operate the whole district," said Stephen C.
Tracy, a regional vice president of Edison who was in charge of the
Chester-Upland proposal. "Now it is going to be a little more
complicated."

District leaders and executives of the management companies all say
they expect the new model to work to the benefit of children in
Chester-Upland.

"Obviously, we're going to be competitors, which is the whole point
of this," said Mr. Tracy, a former superintendent who has been with
Edison for eight years. "But the three companies have some common
interests. We have an interest in the overall success of this
arrangement because it will reflect well on our industry."

Thomas Stewart, the senior vice president of LearnNow, said parents
at the elementary and secondary level will have three curriculum and
school-management models from which to choose in deciding where to send
their children.

"It's exciting, because that is something that only parents with the
wherewithal to seek out private schools have been able to pursue," said
Mr. Stewart, who oversaw LearnNow's bid in Chester-Upland.

He said representatives of all three companies met with the control
board last week to begin hammering out some of the details of the
takeover. The companies plan to work with the teachers' union and a
Teamsters local that represents certain district employees on a joint
contract.

"We all want to assuage teachers' concerns about their status," Mr.
Stewart said.

Mr. Stewart agreed there will be a competitive dynamic, but not of
the sort in which one company will try to drive the others out of
town.

"The competition has been pretty intense up until the decision," he
said. "But now it behooves us all to create a seamless system."

Bob Brown, the regional field director for the PSEA, said he has
heard concerns that children would be entering the high school from
elementary and middle schools using three different curriculum models.
He also expressed concern about plans for the three companies to join
together in working out a contract with the control board and his
union.

"It's going to be a five-party negotiation, so I really don't know
how that's going to work," he said.

Mosaica executives could not be reached for comment last week about
the Chester-Upland contract. Mosaica runs 20 charter schools in five
states, serving 5,000 students. It vied with Edison and others last
year over a Maryland contract to run three failing Baltimore schools.
The state chose Edison.

Limited Resources

Meanwhile, the Chester-Upland contract shines a brighter spotlight
on LearnNow, which was started as a nonprofit venture in the mid-1990s
by Eugene V. Wade Jr., a graduate of Harvard Law School and the Wharton
School of Business at the University of Pennsylvania.

Since his law school days, the 31-year-old entrepreneur has
envisioned a network of charter schools that would draw the best out of
poor and minority children. But Mr. Wade could not attract the amount
of capital necessary to expand his vision as a nonprofit venture.

"Nonprofit foundations said, 'We don't do that. We can give you
$50,000 for a program,' " he said. "But we were looking for $1 million
to build schools."

LearnNow became the first for-profit investment of the New Schools
Venture Fund, an education- investment program run by the legendary
Silicon Valley venture capitalist John Doerr. It has also attracted
early investment from Knowledge Universe, the diverse education company
privately run by the former financier Michael R. Milken.

LearnNow this year operates five charter schools, serving some 2,000
students, in Philadelphia, St. Paul, Minn., and Washington.

"We go from 2,000 students to about 5,000 to 6,000 next year," Mr.
Wade said. "Our overhead is a fraction of Edison's."

Mr. Wade is used to making the most out of limited resources. He
grew up in public housing in the predominantly black, low-income
Roxbury section of Boston. He has attracted others to the executive
ranks of LearnNow with a similar interest in improving the lot of needy
students.

They include Mr. Stewart, who wrote his doctoral dissertation at
Harvard University about the evolution of prisons in the United States,
and LearnNow's president, James H. Shelton 3rd, who grew up in
predominantly poor southeast Washington and joined Mr. Wade after
working for one of Mr. Milken's units at Knowledge Universe.

Mr. Wade believes public acceptance of private managers of public
schools is growing. That would bode well for his company and for more
arrangements like the one in Chester-Upland.

"I think there will be more Chesters," Mr. Wade said. "I don't think
you're going to see Philadelphia or New York say, 'Let's hire an EMO
[education management organization] to run our whole thing. But in
smaller districts, this is a way to scale up and create some leverage
for change."

Mr. Tracy of Edison said he wouldn't be surprised to see more
districts hiring more than one company to manage their schools.

"It's exciting, because there are now many combinations of
strategies available to state and local authorities," he said.
"Certainly across the country, there are a lot of Chesters. And for the
providers, there is an awful lot of potential work out there."

Coverage of new ways of providing public education is supported
in part by funding from the Ford Foundation.

Vol. 20, Issue 29, Pages 1, 12-14

Published in Print: April 4, 2001, as In Pa., District Tries 3-Way Contest To Fix Schools

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